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Aston Lawyer
Aston Lawyer, Solicitor
Category: Law
Satisfied Customers: 10776
Experience:  Solicitor LLB (Hons) 23 years of experience in Conveyancing and Property Law
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A friend wants to borrow about £20K to help his business as

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A friend wants to borrow about £20K to help his business as his bank has withdrawn his overdraft facility for no good reason. I cannot afford to lose this money so is there a way we can come to a contractual arrangement that secures my money. I would want the money repaid with interest in a reasonable timescale
Hello and thanks for using Just Answer.

My name is XXXXX XXXXX am happy to assist you with your enquiry.

The only way you can guarantee security is by putting a Charge on your friend's residential property or business property (if he owns the Freehold for either). However, this would only guarantee you your money back as and when either of the properties are sold, and would rank behind any Bank Mortgage he already has over either of the properties.

In short, if you do lend him the money, there is no 100% fool proof way of getting your money back within a fixed time period even if you have a legally binding agreement which a local Solicitor could draw up without too much trouble- unfortunately, if your friend is unable to repay you as promised, "you can't get blood out of a stone" so you would be stuck with pursuing him for the money.

From what you have told me, my advice has to be that, although he is a friend, business is business, and if you are only prepared to lend the money if you need it back, with interest, within a set time frame, that you really shouldn't lend. Even though he may have every intention of repaying it, if you are lending it to him for his business, there is of course no guarantee that he will be able to repay.

Please let me know if you require any further clarification.

Kind Regards
Customer: replied 4 years ago.

Thank you for your advice. I know my friend has a big mortgage on his house but I don't know the extent of his business commitments. He has paid off his overdraft but that leaves him with little working capital. I suppose there is no other solution like becoming a business partner assuming that the business has a healthy set of accounts etc.?

Hi Anne,

Thanks for your reply.

Even if you were to become a business partner, which is possible to do, provided your friend agrees, this would only give you a share in the profits, so if no profits were made, you wouldn't be any better off and as partner, you would also be liable for any business debts too, so I can't really advise this as a way of getting your money back.

Hope this helps.

Kind Regards
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